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The Principal Financial Well-Being IndexSM Executive Summary - First Quarter 2006

The Principal Financial Group®, the nation's 401(k) leader, commissioned Harris Interactive® to conduct online research with employed US adults (ages 18+) of small and mid-sized U.S. businesses (firm size 10 - 1,000 employees) about their attitudes and perceptions regarding their financial well being and their current employee benefits. Harris Interactive conducted The Principal Financial Well-Being Index survey of 1,374 employees from January 31-February 8, 2006. Data were weighted to be representative of the total population of employed adults who work for small or mid-sized U.S. businesses on the basis of age by gender, education, race/ethnicity, region income and propensity to be online. With a probability sample of this size, one can say with 95% certainty that the results have a sampling error of ± 3 percentage points; however, this was not a probability sample. This is one in a series of quarterly studies to identify and track changes in the workplace of small and mid-sized (growing) businesses.

Summary of Key Findings

  • Income Tax Refunds - Among those who have a feeling for whether or not to expect a state or federal tax refund for 2005, 84% expect to receive a refund. There have been some significant changes in what respondents plan to do with the refund since first quarter of 2003, the last time this question was asked. In 2006, employees are significantly less likely than they were in 2003 to say they will use the refund to pay down or pay off short-term debts (although it is still the most frequently mentioned option) or to spend the money on a big ticket item. When compared with 2003, there has been a significant increase in the percentage that plan to save or invest the refund (38% in 2006 compared to 31% in 2003).
  • Flexible Spending Accounts - Fifteen percent of the respondents participated in a Flexible Spending Account in 2005. With a Flexible Spending Account, any unused funds remaining at the end of the year are forfeited. Of the respondents who did participate in a flexible spending account, 44% had actual expenses within $100 of their estimate. Thirty-nine percent underestimated their actual expenses and 16% overestimated what they would actually spend.
  • Disability Income - Based on a list of potential negative events, over half (51%) of the respondents feel that none of the events is likely to happen to them during the course of a year. This is a significant increase since 2nd quarter 2004 (37%) when this question was last asked. However, when asked if they have ever been in an accident or had an illness that caused them to be out of work for an extended period of time, there has been a significant increase since 2nd quarter 2004 (14% vs 11%). Respondents are most likely to rely on workplace disability insurance benefits (41%), spouse or family (33%), personal savings (26%) or withdrawing from retirement savings (16%) if they become disabled or were unable to be employed in their current job.
  • Roth 401(k)/403(b) - Over half (56%) of the respondents have heard of a Roth 401(k) or 403(b) prior to this survey. There is a relatively high level of interest in the Roth 401(k) or 403(b) with 68% saying they would be interested if their employer offered it. Ten percent of the employees say their companies with 10-1000 employees are offering it this year (however 37% of the respondents are unsure if their employer offers it or not.). Sixty-two percent of the employees whose company offers the Roth 401(k) or 403(b) are participating.
  • Benefits - The availability of most benefits has remained fairly consistent when compared to 1st quarter 2005. However, there has been a significant decline in the availability of the following benefits offered at 10-1,000 employee firms: Health Insurance and Tuition Reimbursement. Employees continue to rate health insurance as the most important benefit, followed by Defined Contribution Plans and then Defined Benefit Plans and Disability Insurance. Health insurance is the benefit most employees would like to see their company improve upon. Compared to 1st quarter 2005, there have been some significant increases in benefit satisfaction for Defined Contribution plans, Disability Insurance and Health Insurance.

Benefit Programs Offered at Businesses with 10 to 1,000 Employees
In Table 1 below, comparisons can be made with 4 previous year's benefit offerings. There are some significant differences between responses from this most recent quarter and 1st quarter 2005 - indicated with "SIG" below.

Table 1
"What types of benefit programs (excluding vacation/holidays) does your company currently offer you?"

Base: 1374 employed U.S. adults in firms of 10-1,000 employees

Company Sponsored Primary Benefits 1 Qtr 2006 1 Qtr 2005 1 Qtr 2004 1 Qtr 2003 1 Qtr 2002
Health Insurance 86%SIG 89%SIG 90% 92% 94%
Life Insurance 62% 63% 69% 68% 74%
Defined Contribution Plans 61% 64% 70% 72% 74%
Free Parking 58% 56% 60% 57% 63%
Disability Insurance 45% 47% 52% 52% 55%
Flex Time 26% 23% 28% 30% 24%
Tuition Reimbursement 24%SIG 28%SIG 35% 34% 42%
Profit Sharing/Bonus 24% 26% 27% 26% 26%
Defined Benefit Plans 21% 19% 20% 24% 28%
Financial Planning 10% 10% 11% NA NA
Stock Options 9% 9% 11% 12% 9%
Personal Banking Services 9% 7% 8% 10% NA
Legal Services 7%SIG 5%SIG 9% NA NA
Executive Benefits 3% 4% 4% 4% NA
Child Care Subsidies 3% 2% 3% 2% 3%
On-site Day Care 2% 2% 3% 2% 3%
Other 6% 8% 8% 8% 9%

SIG - varies significantly (95% level) from comparison

Benefit Satisfaction
Upon identifying what benefits they are being offered through their employers, employees were asked to rate their satisfaction with some of the major benefits. Employees are most satisfied (rating of 8, 9 or 10 on a 10 point scale) with their defined contribution plan (57%), disability insurance (51%), defined benefit plan (50%), and their stock options (50%). In comparing this quarter's results with previous years, there are notable differences in satisfaction levels for a variety of benefits indicated with "SIG". Three benefits had a significant increase in satisfaction this quarter - Defined Contribution Plans, Disability Insurance and Health Insurance when compared with 1st quarter 2005. Table 2 illustrates all benefits listed and ratings.

Table 2
"Although you may have mentioned more than appear below, you indicated that you have the following benefit program(s) through your company. Using a scale from "1" to "10", where "1" means Not At All Satisfied and "10" means Very Satisfied, please indicate how satisfied you are with each benefit program."

Percentages included in chart represent those rating satisfaction as an 8, 9 or 10.

Base: varies by benefit offered by employer

Satisfaction with Benefit 1 Qtr 2006 1 Qtr 2005 1 Qtr 2004 1 Qtr 2003 1 Qtr 2002
Defined Contribution Plans (N=833) 57%SIG 48%SIG 43% 40% 50%
Disability Insurance (N=590) 51%SIG 44%SIG 38% 42% 47%
Defined Benefit Plans (N=274) 50% 52% 46% 54% 57%
Stock Options (N=102) 50% 43% 32% 44% 30%
Profit Sharing/Bonus (N=303) 49% 55% 38% 38% 38%
Life Insurance (N=855) 49% 48% 40% 42% 50%
Health Insurance (N=1192) 45%SIG 40%SIG 35% 39% 47%

SIG - varies significantly (95% level) from comparison

Each employee respondent was asked to identify what benefits they would most like their employers to offer, aside from those already offered. As Table 3 shows, consistently we have seen defined benefit plans, profit sharing/bonus plans, and flexible work schedules topping the list of those desired.

Table 3
"Which one employee benefit do you most wish that your company would offer you (excluding vacation and holidays)?"

Base: N=1373 employed U.S. adults in firms of 10-1,000 employees

Ranking Benefits 1 Qtr 2006 1 Qtr 2005 1 Qtr 2004 1 Qtr 2003 1 Qtr 2002
1 Defined Benefit Pension Plan 21% 22% 22% 17% 23%
2 Profit Sharing/Bonus Plan 14% 14% 16% 11% 15%
3 Flex time 11% 11% 13% 11% 13%
4 Defined Contribution Plan 7% 9% 7% 7% 4%
4 Tuition Reimbursement 7% 8% 8% 9% 7%
5 On-Site Day Care 5% 4% 3% 4% 4%

Aside from those benefits employees would like to see added to their employer's benefit programs, they were also asked to identify what benefits they would like to have improved upon. The top 2 benefits mentioned are health insurance (43%) and defined contribution plans (13%) - see Table 4 for additional detail.

Table 4
"Which one employee benefit (excluding vacation and holidays) do you most wish that your company would improve upon?"

Base: N= 1374 employed U.S. adults in firms of 10-1,000 employees

Ranking Benefits 1 Qtr 2006 1 Qtr 2005 1 Qtr 2001
1 Health Insurance 43% 43% 40%
2 Defined Contribution Plan 13%SIG 16%SIG 25%
3 Profit Sharing/Bonus Plan 6% 5% 9%
4 Defined Benefit Plan 5%SIG 3%SIG 4%
5 Life Insurance 3% 3% 2%
5 Flex time 3% 3% 2%

Health Coverage Changes
As noted above, health insurance is the top benefit employees would like their employer to improve upon. To better understand what types of changes employees have seen recently in their health coverage, employees were asked to select from a list those changes they've seen in the past 12 months. As illustrated in Table 5, the largest proportion of employees have seen increases in co-pays (39%), deductibles (32%), and reduced medical benefit coverage options (14%). In comparing this quarter's results with those of 1st quarter 2005, there have been no significant changes.

Table 5
"Over the past 12 months, has your employer made any of the following changes in your health care coverage?"

Base: N=1192 employed U.S. adults in firms of 10-1,000 employees (employees with health insurance)

  1 Qtr 2006 1 Qtr 2005 1 Qtr 2004
Increased employee co-pays 39% 42% 51%
Increased employee deductibles 32% 33% 36%
Reduced medical benefit coverage options 14% 16% 21%
Offered additional medical benefit coverage options 7% 9% 9%
Moved to HRA or MSA plans 4% 3% 5%
Eliminated employer-sponsored health care benefits 2% 1% 2%
Eliminated retiree health care benefits 1% 2% 2%
None of these changes have occurred 46% 44% 35%
  N=1192 N=986 N= 1,116

Benefit Importance
All employee respondents were asked to rate a group of benefits in terms of how important they are on a 10-point scale with 10 being "Very Important." As shown in Table 6, two benefits (Health Insurance and Defined Contribution Plans) have seen significantly lower importance levels this quarter compared to last quarter (based on top 3 box importance ratings). Even though they have declined significantly in importance, they are still rated as the top two most important benefits.

Table 6
"Using a scale from "1" to "10", where "1" means Not At All Important and "10" means Very Important, please indicate how important each benefit program is to you."

Percentages included in chart represent those rating importance as an 8, 9 or 10.

Base: 1374 employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006 1 Qtr 2005 1 Qtr 2004 1 Qtr 2003
Health Insurance 86%SIG 89%SIG 92% 88%
Defined Contribution 68%SIG 73%SIG 74% 70%
Disability Insurance 55% 53% 58% 56%
Defined Benefit Plans 55% 56% 59% 57%
Life Insurance 50% 47% 53% 54%
Profit-Sharing/Bonus 44% 45% 47% 41%
Stock Options 20% 19% 20% 18%

SIG - varies significantly (95% level) from comparison

Benefits for Recruiting & Retention
Firms with 10 to 1,000 employees offer employee benefits to aid in the recruiting and retaining of quality employees. To measure how employees react to the presence of good employee benefits, a series of agree statements were asked. There was a significant decrease in the proportion of employees who agree that a good employee benefits plan encourages them to work harder and perform better - see table 7.

Table 7
"Please indicate the extent to which you agree or disagree with the following statements . . ."

Base: 1374 employed U.S. adults in firms of 10-1,000 employees

Trending Comparison(% of respondents agreeing completely or somewhat) 1 Qtr 2006 1 Qtr 2005 1 Qtr 2004 1 Qtr 2003 1 Qtr 2001
Having a good employee benefits plan encourages me to work harder and perform better. 62%SIG 67%SIG 71% 64% 59%
Having a good employee benefits plan keeps me working for my current company. 59% 62% 60% 62% 75%
My company is concerned about my long-term financial future. 25% 26% 25% 26% 28%

SIG - varies significantly (95% level) from comparison

Employee Financial Well Being
In measuring employees' attitudes and perceptions about their financial well-being, a series of different questions were asked. First they were asked to identify how much they agreed with some statements relating to how concerned they are about their long-term financial future and how happy they are about their current well-being. There were no statistically significant changes in this year's results when compared with last year. According to Table 8, 73% somewhat or completely agree they are very concerned about their long-term financial future, while 27% of employees somewhat or completely agree that they are extremely happy with their current financial well-being. Three in ten somewhat or completely agree that they have not yet planned for retirement savings or security.

Table 8
"Please indicate the extent to which you agree or disagree with the following statements . . ."

Base: 1374 employed U.S. adults in firms of 10-1,000 employees

(% of respondents agreeing completely or somewhat) 1 Qtr 2006 1 Qtr 2005 1 Qtr 2004 1 Qtr 2003
I am very concerned about my long-term financial future. 73% 75% 76% 75%
I am extremely happy about my current financial well-being. 27% 27% 34% 25%
I have not yet planned for retirement savings/security. 30% 28% 26% 27%

Job Security
Job security continues to top the importance chart when compared to long-term financial future and challenging work. In reviewing responses from the previous year's, there has been an increase in how many employees rate long-term financial future as #1 in importance - 40% in 1st Quarter 2006 and 36% in 1st Quarter 2005. Challenging work saw a significant decline from 2005 to 2006.

Table 9
"Please rank the following items in terms of how important it is to you."

Base: 1374 employed U.S. adults in firms of 10-1,000 employees

Respondent Ranked Item #1 1 Qtr 2006 1 Qtr 2005 1 Qtr 2004 1 Qtr 2003 1 Qtr 2002
Job Security 47% 47% 52% 49% 50%
Long-Term Financial Future 40%SIG 36%SIG 31% 35% 32%
Challenging Work 13%SIG 17%SIG 17% 16% 17%

SIG - varies significantly (95% level) from comparison

Investment Changes
Changing market conditions can spur some individuals to make changes to their investments. To measure what type of changes employees are making, they were asked to identify if and how they are moving their retirement savings. Based upon response, a significantly higher percentage (75%) of employees who have retirement savings are not making changes to how their investments are invested than last year at this time. Twenty-five percent of the respondents who have retirement savings are making changes with 16% moving to stable investments and 9% to more volatile investments. There was a significant decline in the percentage of respondents moving from more volatile to more stable investments in 2006 when compared to 2005.

Table 10
"Given the current stock market and economic conditions, have you made changes in how you have your retirement savings invested - moving from volatile investments to more stable investments."

Base: N=1374 employed U.S. adults in firms of 10-1,000 employees with retirement savings

  1 Qtr 2006 1 Qtr 2005 1 Qtr 2004
Yes - I moved from more volatile to more stable investments 16%SIG 22%SIG 19%
Yes - I moved from more stable investments to more volatile investments 9% 9% 8%
No - I have not made any changes 75%SIG 70%SIG 73%
  N=1101 N=916 N=577

Pension Plan Changes
There has recently been news of companies freezing or ending their defined benefit plans. We wanted to see if it has been happening to employees in companies of 10-1000 employees. Table 11 shows four percent of the respondents have had their defined benefit plans frozen or ended within the past year. Forty percent of the respondents have never had a defined benefit plan and six percent haven't had a defined benefit plan for over a year. Almost half have not had their defined benefit plan frozen or ended in the past year.

Table 11
"Has your company frozen or ended your pension plan (defined retirement benefit plan where employer funds plan completely) in the past year?"

Base: N=1374 employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006
Yes 4%
No 49%
Company hasn't offered a defined benefit pension plan for over a year 6%
Company has never offered a defined benefit pension plan 40%

We asked respondents who have had their pension plan frozen within the past year if their company offered any other programs or services to help prepare for retirement. The services or programs most frequently offered were automatic enrollment for defined contribution plans/401(k) (21%) and increased company matches for defined contribution plans/401(k) (21%).

Table 12
"Has your company added any other programs or services to help you prepare for retirement?" (select all that apply)

Base: N=46* U.S. Adults age 18+ who have had their pension frozen in the past year

  1 Qtr 2006
Automatic enrollment for defined contribution plan/401(k) 21%
Increased company match in defined contribution plan/401(k) 21%
Automatic increases in deferral amounts for defined contribution plan/401(k) 18%
Other savings/income products for retirement 16%
Added the Roth 401(k) as an option 14%
Financial planning advice or guidance on site at company, via the phone or web, etc 14%
None of these 35%

* Small base. Data should be used directionally.

Income Tax Refunds
Among those who have a feeling for whether or not they will receive a federal or state tax refund for 2005, 84% expect to receive a refund. There has been no significant change since first quarter of 2003, the last time this question was asked. There have been some significant changes in what respondents plan to do with the refund. They are significantly less likely to use the refund to pay down or pay off short-term debts (however these are the most frequently mentioned) or to spend the money on a big ticket item. There has been a significant increase in the percentage that plan to save or invest the refund.

Table 13
"Do you expect to receive a federal or state tax refund for 2005?"

Base: N=employed U.S. adults in firms of 10-1,000 employees who have a feeling for whether or not they will receive a federal or state tax refund for 2005.

  1 Qtr 2006 1 Qtr 2003
Yes 84% 83%
No 16% 17%
  N=1145 N=975

Table 14
"What do you plan to do with your tax refund?" (select all that apply)

Base: employed U.S. adults in firms of 10-1,000 employees who expect to receive a refund

  1 Qtr 2006 1 Qtr 2003
Pay down or pay off short-term debts 44%SIG 50%SIG
Save or invest the refund 38%SIG 31%SIG
Pay down or pay off longer-term debts. 17% 14%
Spend on consumer products - clothing, electronics, etc. 16% 14%
Spend on a big ticket item 7%SIG 16%SIG
Other 10% 13%
Not Sure 8% N/A
  N=945 N=740

SIG - varies significantly (95% level) from comparison

Flexible Spending Accounts
Employees in companies with 10-1,000 employees were asked if they participated in a flexible spending account in 2005. Fifteen percent of the respondents did participate.

Table 15
"Did you participate in a flexible spending account in 2005?"

Base: N=1374 employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006
Yes 15%
No 85%

A flexible spending account requires employees who participate to designate before tax dollars toward reimbursement accounts. Any unused funds remaining at the end of the year are forfeited. This means it is important to estimate your expenses carefully. We asked the respondents who did participate in a flexible spending account how accurate they were in their estimate. As illustrated in Table 16, 44% had actual expenses within $100 of their estimate. Thirty-nine percent underestimated their actual expenses and 16% overestimated what they would actually spend.

Table 16
"If yes, how accurate was your Flexible spending estimate for 2005?"

Base: N=193 employed U.S. adults in firms of 10-1,000 employees who participated in flexible spending in 2005

  1 Qtr 2006
Overestimated what I would spend by over $500 4%
Overestimated what I would spend by $251-$500 5%
Overestimated what I would spend by $101-$250 8%
Estimate was within $100 of actual expenses 44%
Underestimated what I would spend by $101-$250 14%
Underestimated what I would spend by $251-$500 15%
Underestimated what I would spend by over $500 10%

Corporate Bonuses
One in four respondents received a corporate bonus for 2005. As shown in Table 18, the bonus was most often used to pay down or pay off short term debts (35%), purchase gifts during the holiday season (31%) and saved or invested (24%), similar to the responses for the planned uses of the tax refund.

Table 17
""Did you receive a corporate bonus for 2005?"
Base: N=1374 employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006
Yes 25%
No 75%

Table 18
"How did you use it?" Select all that apply.

Base: N=290 employed U.S. adults in firms of 10-1,000 employees who did receive a corporate bonus for 2005

  1 Qtr 2006
Pay down or pay off short-term debts 35%
Purchased gifts during the holiday season 31%
Save or invest the bonus 24%
Spend on consumer products - clothing, electronics, etc. 17%
Haven't spent it yet 11%
Pay down or pay off longer-term debts 6%
Spend on a big ticket item 3%
Other 7%
Not Sure 2%

Disability Income Insurance
Respondents were provided a list of potential things that could happen and asked which is most likely to happen over the course of a year. Just over half (51%) said none of these things are most likely to happen over the course of a year which is significantly higher than the last time this question was asked on the survey which was 2nd quarter of 2004.

Table 19
"Which of the following do you believe is most likely to happen during the course of a year?"

Base: Employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006 2 Qtr 2004
You see a doctor for stress, anxiety or depression 24% 21%
You are involved in a motor vehicle accident 15%SIG 26%SIG
You suffer a bad back that keeps you out of work 8% 10%
You become seriously ill or die 2%SIG 5%SIG
Your house burns down 1% -
None of these 51%SIG 37%SIG
  N=1374 N=1307

SIG - varies significantly (95% level) from comparison

  • Females are significantly more likely to believe they will need to see a doctor for stress, anxiety, or depression (32%) than males (18%).
  • Males are significantly more likely to believe they will be involved in a motor vehicle accident (19% vs 11%), suffer a bad back that keeps them out of work (10% vs 5%), or become seriously ill or die (3% vs 1%) than females.

Approximately one in five (21%) respondents feel very or somewhat knowledgeable about individually owned disability income insurance. Just over half (53%) feel very or somewhat unknowledgeable.

Table 20
"How knowledgeable do you feel about individually owned disability income insurance?"

Base: Employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006 2 Qtr 2004
Very knowledgeable 3% 3%
Somewhat knowledgeable 18% 16%
Neither knowledgeable or unknowledgeable 26% 23%
Somewhat unknowledgeable 24% 26%
Very unknowledgeable 29%SIG 33%SIG
  N=1374 N=1307

SIG - varies significantly (95% level) from comparison

Significantly more respondents have had an accident or illness that caused them to be out of work for an extended period of time (14%) than when this question was last asked in 2nd quarter 2004.

Table 21
"Have you ever been in an accident or had an illness that caused you to be out of work for an extended period of time (more than three months)?"

Base: Employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006 2 Qtr 2004
Yes 14%SIG 11%SIG
No 86%SIG 89%SIG
  N=1374 N=1307

SIG - varies significantly (95% level) from comparison

  • Significantly fewer employees age 18-34 (8%) say they have had an accident or illness that has caused them to miss work for an extended period of time than employees in the older age groups of 35-44 (17%), 45-55 (17%) and 55+ (19%).

Table 22
"What do you think is your likelihood of becoming disabled due to an accident or illness and being unable to work for an extended period of time (more than three months) during your lifetime?"

N= Respondents who have not had an accident or illness that caused them to miss work for an extended period of time

  1 Qtr 2006 2 Qtr 2004
Very likely 5%SIG 2%SIG
Somewhat likely 20%SIG 14%SIG
Neither likely or unlikely 33% 36%
Somewhat unlikely 27% 29%
Very unlikely 16% 19%
  N=1177 N=1161

SIG - varies significantly (95% level) from comparison

Respondents have a greater level of uncertainty on how they would financially maintain their current standard of living if they were to become disabled with one-quarter responding they are "Not sure". A significantly smaller percentage of respondents in 2006 replied they would be withdrawing money from savings or taking a hardship withdrawal from their retirement savings than in 2004.

Table 23
"If you became disabled and were unable to be employed in your current job, which of the following best represents how you would financially maintain your current standard of living?" Please select all that apply.

Base: Employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006 2 Qtr 2004
Depend upon disability insurance benefits through my employer's disability insurance coverage 41%SIG 53%SIG
Rely financially on spouse/significant other or family 33% N/A
Rely financially on spouse/significant other N/A 38%
Rely financially on family N/A 20%
Withdraw from personal savings 26%SIG 31%SIG
Hardship withdrawal from retirement savings 16%SIG 21%SIG
Depend upon disability insurance benefits from my own personal disability insurance policy 13% 14%
Sell investments - stocks, bonds, mutual funds 13%SIG 16%SIG
Sell other investments 8% 8%
Not sure 25%SIG 14%SIG
None of these 6%SIG 2%SIG
  N=1374 N=1307

SIG - varies significantly (95% level) from comparison

Table 24
"Do you personally own a disability income insurance policy on yourself (an individual policy where you pay 100 % of the premium)?"

Base: Employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006 2 Qtr 2004
Yes 13% 13%
No 87% 87%
  N=1374 N=1307

  • Significantly fewer employees age 18-34 (7%) own an individual disability policy than employees age 35-44 (18%) and age 45-54 (16%).

Table 25
"Which of the following are the main concerns you have regarding your current financial situation?" Please select all that apply.

Base: Employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006 2 Qtr 2004
Ability to save for retirement 62% 64%
Protecting my financial assets due to an unexpected event (i.e. death, disability) 46% N/A
Covering monthly expenses 44% 45%
Ability to reduce credit card debt or other short-term debt 41% 42%
Saving for my children's education 28%SIG 24%SIG
Other 6%SIG 4%SIG
Ability to reduce long term debt N/A 32%
None of these 8% 8%
  N=1374 N=1307

SIG - varies significantly (95% level) from comparison

  • Females are significantly more likely to say they are concerned about covering monthly expenses (49% vs 39%) and reducing credit card debt or other short-term debt (45% vs 37%) than males.

Real Estate Market - There has been much discussion lately about the real estate market and if the bubble has burst or if it is still going strong. Employees were asked when is the best time to purchase a new home. Three out of five responded that it was in the past. A significantly smaller portion (17%) said it is in the present than when we last asked this question in 3rd quarter of 2005. Table 26 shows the specific breakdowns.

Additionally, respondents were asked if they or someone they know has purchased a home with the principal intent of selling it for a short time later. Twenty-three percent responded with a "yes" which was significantly fewer than in 3rd quarter 2005. See Table 27 for details.

Employees were also asked if they had personally delayed selling a home based on the real estate market and the potential impact that decision has had on their retirement date. See Tables 28 and 29 for details.

Table 26
"Would you say the best time to purchase a new home . . .?"

Base: Employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006 3 Qtr 2005
Was in the past 60% 59%
Is in the present 17%SIG 24%SIG
Will be in the future 24%SIG 16%SIG
  N=1374 N=1147

SIG - varies significantly (95% level) from comparison

Table 27
"Have you or has someone you know, purchased a home with the principal intent of selling it for a profit a short time later?"

Base: Employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006 3 Qtr 2005
Yes 23%SIG 27%SIG
No 77%SIG 73%SIG
  N=1374 N=1147

SIG - varies significantly (95% level) from comparison

Table 28
"If you were planning on selling a home this year, have you decided to put off the sale because of the declining real estate market?"

Base: N=1374 employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006
Yes, I have decided to put off the sale based upon the market. 4%
No, the market hasn't impacted my decision to sell the home this year. 11%
I was not planning to sell a home this year. 85%

Table 29
"Will this have any impact on when you are able to retire?"

Base: N=39* employed U.S. adults in firms of 10-1,000 employees who put off the sale of a house

  1 Qtr 2006
No impact on estimated retirement. 63%
Yes, it will impact when I am able to retire. 37%

* Small base. Data should be used directionally.

Investment Outlook

Table 30
"How are you feeling about your investment outlook for 2006 compared to 2005?"

Base: N=1374 employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006
More optimistic about my investment outlook in 2006 30%
Less optimistic about my investment outlook in 2006 19%
No change in my investment outlook 51%

  • Males (33%) are significantly more likely to say they are optimistic about their investment outlook in 2006 than females (26%).

Roth 401(k) and Roth 403(b)
Roth 401(k)'s and Roth 403(b)'s are an option employers can provide to their employees if they choose. Employees were asked a series of questions to help us better understand public awareness, availability and perception of the Roth 401(k) and Roth 403(b). As seen in Table 31, over half (56%) have heard of a Roth 401(k) or 403(b) prior to this survey. Table 32 shows there is a relatively high level of interest in the Roth 401(k) or 403(b) with 68% saying they would be interested if their employer offered it. Interest level is down from 72% in 4th quarter 2005.

Ten percent of employees say their companies with 10-1000 employees are offering it this year (however 37% of the respondents are unsure if their employer offers it or not.). 62% of the employees whose company offers the Roth 401(k) or 403(b) are participating.

Table 31
"Beginning January 1, 2006, participants can designate a portion of their elective deferral contributions to a 401(k) or 403(b) plan as after-tax Roth elective deferral contributions that are includable in gross income. At qualified distribution, the Roth contributions, including earnings, are tax-free. It is up to your employer to decide whether or not to offer the Roth 401(k) or 403(b) option.

Prior to this survey, had you ever heard of a Roth 401(k) or a Roth 403(b)?"

Base: employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006 4 Qtr 2005
Yes 56% 58%
No 44% 42%
  N=1374 N=1213

Table 32
"Does the Roth 401(k) or Roth 403(b) sound like something you would be interested in if, it were offered by your employer?"

Base: employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006 4 Qtr 2005
Yes 68%SIG 72%SIG
No 32%SIG 28%SIG
  N=1374 N=1213

SIG - varies significantly (95% level) from comparison

  • Employees age 55+ (59%) are significantly less likely to say they would be interested in a Roth 401(k) or 403(b) if it were offered by their employer than employees who are 35-44 years old (73%) and employees who are 18-34 years old (70%).

Table 33
"Is a Roth 401(k) or Roth 403(b) something your employer is offering in 2006?"

Base: N=1374 employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006
Yes 10%
No 53%
Not Sure 37%

Table 34
"Did you participate in the Roth 401(k)?"

Base: N=121 employed U.S. adults in firms of 10-1,000 employees whose employer offered Roth 401(k) in 2006

  1 Qtr 2006
Yes 62%
No 38%

Table 35
"How would you prefer to be educated about the Roth 401(k) or Roth 403(b) option if it were available through your employer?" Mark all that apply.

Base: employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006 4 Qtr 2005
Receive information from my employer 55% 58%
Do my own research 43% 44%
Receive information from my plan provider 36%SIG 47%SIG
Talk to a financial advisor 34%SIG 39%SIG
I am not interested in being educated about this 12%SIG 8%SIG
Other 2% 2%
  N=1374 N=1213

SIG - varies significantly (95% level) from comparison

  • Females (60%) are significantly more likely to say they would prefer to receive information from their employer than males (50%).
  • Employees age 18-34 (28%) are significantly less likely to say they would prefer to receive information from their plan provider than employees in the older age groups of 35-44 (38%), 45-55 (40%) and 55+ (40%).

Only 17% of the respondents feel very or somewhat knowledgeable about the Roth 401(k) or Roth 403(b).

Table 36
"How knowledgeable do you feel about the Roth 401(k) or Roth 403(b)?"

Base: N=1374 employed U.S. adults in firms of 10-1,000 employees

  1 Qtr 2006
Very Knowledgeable 3%
Somewhat Knowledgeable 14%
Neither Knowledgeable or Unknowledgeable 22%
Somewhat Unknowledgeable 24%
Very Unknowledgeable 37%

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